A few years ago retailers and a huge number of manufactures were enticed by the profit opportunity of buying stuff from China. Lots more dosh arrived at the bottom line of the balance sheet. A huge number of companies also survived the recession by this move, allowing them to establish a market or trade on a cost effective reduced volume basis. But there is a catch.
Orders placed on Chinese manufactures involve substantial minimum order quantities to attract the prices charged and then 12 weeks travel on the high seas. That great new fashion design which sold more that expected goes out of stock for 16 weeks. Conversely that sudden ‘must have’ arrives too late for the season and the store is left with a heap of stock nobody wants.
The vagaries of our weather takes a hand. Apparently we don’t like wandering around shops when it’s hot and sunny, or raining or there’s and ‘r’ in the month. The shops are politely stuffed. And here is the catch 22. Whilst the CEO’s faced east investment in the UK’s manufacturing facilities has been decimated. We have lost skills and the chances of recruiting replacements now seem more distant than manufactures and retailers can absorb. So we have to reply on China and the slow boat from China as the song goes. The chancellor sings his praises on reducing the current deficit from £150 billion in 2010 down to £81 billion. Trouble is Germany in the same time frame wiped their deficit slate clean, and France now has a much smaller deficit. Their investment in manufacturing has also allowed our German and French counterparts to be significantly more productive than the UK. Even Spain is more productive and now watches as we languish at the bottom of the G-7 league.
But then the chancellor spouts that employment is at its highest since creation. Alas the figures reflect zero hours contracts, low skilled and low paying jobs which do not require anything more than primary school education. Graduates clammer for anything that moves struggling with the albatross of student debt around their necks for decades. And we ignore the job creation from redundant employees using their payoff to enter self-employment as eBay or Amazon online entrepreneurs many working 80 hours a week for next to nowt.
Before we can resurface we need a huge amount of investment to raise the skill level and productivity of the UK that can allow us to break free of China. A dilemma that seems to have passed by the government thus far.
By Alistair Owens